The UK’s housing market is witnessing a notable rebound, as evidenced by the latest insights from Rightmove and Zoopla.
Despite the fluctuations in mortgage rates, the sector is showing signs of robust activity and increased buyer confidence. Mortgage rates have seen slight increases over the past year, with the average 5-year fixed mortgage rate climbing to 4.80% from 4.59%, and the 2-year fixed rate now at 5.15%, up from 4.92%. Specifically, the average 85% LTV 5-year fixed rate has inched up to 4.73% from 4.64%, while the 60% LTV 5-year fixed rate has risen modestly to 4.30% from 4.25%. These shifts have led to an increase in the average monthly mortgage payment for a typical first-time buyer property to £1,087, up from £1,070 a year ago.
The housing market has continued its strong start to the year, with Zoopla predicting a 10% increase in total home sales, forecasting 1.1 million transactions in 2024 compared to 1 million in 2023. This optimism is bolstered by a 21% increase in the number of homes for sale and an 11% rise in buyer demand, alongside a 15% uptick in sales agreed compared to last year. The North East and London are leading this surge, demonstrating significant buyer confidence and a more realistic approach to pricing by sellers.
The UK’s house price inflation rate has decelerated to -0.5%, marking a slowdown in the rate of price declines across all regions. Some areas are still experiencing price falls, but others, including Wales, Scotland, and Northern Ireland, are seeing positive price growth, with annual inflation reaching 4.3%.
What’s more, the impact of location on housing costs has led to a “three-speed” market across the UK:
- Southern England faces the largest price falls, affected by rising mortgage rates and reduced buying power, with prices 30% above the UK average.
- London, though the most expensive, has seen a gradual improvement in affordability over the past seven years, leading to a quicker recovery in price inflation.
- The rest of the UK has experienced limited annual price falls, with less impact from higher mortgage rates on buying power.
Commenting on the latest report, Richard Donnell, Executive Director at Zoopla said:
“The housing market has proved very resilient to higher mortgage rates and cost of living pressures. More sales and more sellers shows growing confidence amongst households and evidence that 4-5% mortgage rates are not a barrier to improving market conditions.
The momentum in new sales being agreed has been building for the last 5 months and the sales market is on track for 1.1m sales over 2024 supported by new sellers coming to the market. While sales are set to increase we don’t expect house price growth to accelerate further in 2024.”
Nathan Emerson, CEO at Propertymark, said that it is “encouraging” to see a year on year momentum within the housing market and these figures “should encourage people who were hesitant about selling their home to consider their move”. He continued:
“Though interest rates have not started to fall yet, the Bank of England’s last Monetary Policy Committee meeting should give people confidence as they now know that their borrowing costs are unlikely to increase. If inflation falls as expected, we hope that the Bank of England will consider cutting interest rates which will help ease the financial strain placed on the nation.”
